Streetwise for Sunday, May 6, 2018

Given the many facets of uncertainty facing the financial markets, does Wall Street still make sense? Absolutely! The opportunities to invest in the shares of quality companies are abundant in any economic environment.

However, to seize the moment requires a willingness to make decisions with prodigious confidence and the fortitude to stick to those decisions despite the entreaties of others.

At the same time, do not make your life unnecessarily difficult. Combine determination with a sense of confidence and you will be successful. Or to quote George Zimmer, founder and former CEO of the Men’s Wearhouse, “I guarantee it.”

Take Apple (AAPL) for example. I have been besieged with phone calls and email messages asking whether to buy, hold or sell Apple’s shares. Moreover, perusing a variety of news and financial websites brings forth a cornucopia of bullish articles on the company as well as comparable number of bearish ones. The confusion is no surprise.

There are approximately 43 analysts who currently write about Apple. Of those, 15 have a buy recommendation, 14 have a hold, and the remaining have an outperform, sort of a “middle of the road I cannot make up my mind designation.” There are no sell recommendations; a welcome change from last year.

Much to the consternation of many of the Street’s doomsayers, Apple’s second quarter numbers did, from my perspective, knock the cover off the ball.

Apple posted second quarter revenue of $61.1 billion, up from $52.9 billion over the same period a year ago. The Street’s consensus was for $60.8 billion, according to Thomson Reuters I/B/E/S.

Average selling price for iPhones was $728, compared with Wall Street expectations of $742. The figure is up more than 10 percent from $655 a year ago, suggesting that Apple’s iPhone X, which starts at $999, has helped to raise prices.

Analysts had feared the high price was muting demand for the iPhone X, but Apple’s Chief Executive Tim Cook said it was the most popular iPhone model every week in the March quarter.

Earnings were $2.73 per share, versus expectations of $2.68 per share, up from $2.10 a year ago.

“This is the first cycle that we’ve ever had where the top of the line iPhone model has also been the most popular,” Cook said during the company’s earnings call. “It’s one of those things like when a team wins the Super Bowl, maybe you want them to win by a few more points. But it’s a Super Bowl winner and that’s how we feel about it.”

The company’s guidance for the June quarter calls for revenue of between $51.5 billion and $53.5 billion, versus a $51.6 billion consensus. The share repurchases in the March quarter drove Apple’s cash, net of debt, down slightly to $145 billion.

The results marked a significant acceleration compared to its fiscal first quarter when revenue and earnings per share increased 13 percent and 16 percent respectively, year over year. Furthermore, this extended the company’s streak of consecutive quarters of accelerating year-over-year revenue growth since it returned to growth in the first fiscal quarter of 2017.

In 2016, disappointment with the iPhone 6S sparked talk that Apple had lost its edge, and the stock underperformed the S&P 500 multiple for several quarters. Apple’s more generous payout to shareholders should take some of the sting out of any similar disenchantment today. But the company will face increasing pressure to show it has more tricks up its sleeve.

Meanwhile, Apple lavished cash on its shareholders during the first three months of the year and it intends to keep doing so. With substantial overseas cash freed up by the tax bill, Apple bought back $23.5 billion of its own stock in the March quarter, a record amount for any company and it added $100 billion to its target for future repurchases.

Apple’s dividend increase will be reflected in a cash dividend of 73 cents per share payable on May 17. Its current payout is 63 cents a share.

And while Apple’s share price has not been in a tailspin, the price has been a bit moribund following the launch of the iPhone X. Maybe now things will change.

Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddInternational.com.